Trader Fact Files: Boaz Weinstein

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Boaz Weinstein is a derivatives trader and hedge fund manager. He is the founder of Saba Capital Management. His net worth is estimated at $450 million as of September 2012.

Facts

Boaz Weinstein was born in 1973 to Israeli and American parents. He grew up in a secular Jewish family, with his father owning an insurance brokerage in Brooklyn and his mother working for the Foreign Office in Jerusalem before being a translator for the Haaretz newspaper. His older sister Ilana is one of the top hedge fund recruiters and is the founder and CEO of IDW Group.

In high school, he won a stock-picking competition whose prize was a visit to the New York Stock Exchange. He graduated from Stuyvesant High School in New York and from the University of Michigan with a degree in philosophy in 1995, as he loved reading Aristotle, David Hume, and Descartes.

Weinstein is skilled in chess, poker, and blackjack. He earned the title of National Master by age sixteen. In 2005, Warren Buffet invited him to a game of poker where he won a Maserati. Word through the grapevine is that he has been banned from the Bellagio in Las Vegas for counting cards.

He married Tali Farimah Farhadian, who is a Rhodes scholar and an attorney with the United States Department of Justice, in the Central Synagogue in Manhattan. Weinstein reportedly bought a $25.5 million property on Manhattan’s 907 Fifth Avenue. He is also into philanthropy, with special focus in public school education and Jewish causes.

Career

Rumour has it that he came across a Merrill Lynch ad posted at a bulletin board in school, and he was accepted for an internship at the age of 15. With this stint, he made use of his “very deep voice” to make phone calls for the firm as an after-school job and full-time in summer. When he was 18, he had trouble landing a summer job at Goldman Sachs until he ran into fellow chess player David Delucia, who was the head of corporate bond trading back then and arranged additional interviews to help him get the internship.

Weinstein started with Deutsche Bank in 1998 and became the bank’s youngest ever Managing Director at age 27. His rise to prominence was around 2006 when one of his trading groups made over $1.5 billion in profits. In his eleven years with the company, he chalked up only one losing year wherein his proprietary trading group reportedly shared 18% on $10 billion capital in 2008.

In 2009, Weinstein pushed through with his plan with Deutsche Bank to take 15 members out of his trading team to form his own hedge fund, Saba Capital Management, which was named after his grandfather. Its flagship fund was launched in August 2009 with $140 million, which grew to $5.78 billion in June 2012. This included a $780 million in a “Tail Hedge Fund” that will protect client assets in the event of rare and unexpected events.

In 2011, Saba rose to fame as the fastest growing hedge fund, featured by Absolute Return + Alpha magazine. Assets under management rose 293% in 2010, which also led Weinstein to be listed Fortune Magazine‘s “40 Under 40” in 2010 and 2011. The following year, the fund scored huge profits from a $2 billion loss of JPMorgan on failed investments in credit derivatives. However, the fund lost money from 2012 to 2014, leading investors to pull out funds and assets to fall to $1.95 billion as of January last year.

Achievements

Saba employs a credit relative-value strategy which looks at relationships between credit and equity. The fund is also long volatility, which means that it was able to profit in periods when markets move sharply.

With that, Weinstein gained popularity in taking the opposite side of JPMorgan’s “London Whale” trade in 2011. In February that year, he recommended going long Investment Grade Series 9 10-Year Index CDS when JPMorgan was long. He was quoted saying that the CDS was “very attractive” and can be bought at a “very good discount.”

At first, this position wasn’t working out too well as the index continued to sink on JPMorgan’s aggressive short position. However, the tide turned two weeks later when price spiked and other traders caught on. JPMorgan CEO Dimon announced a $2.3 billion loss on the trade while Weinstein continued to see his position grow.

In 2015, Weinstein was sued by the Canadian Public Sector Pension Investment Board for allegedly marking down the value of the portfolio before paying out redemption requests. He then allegedly brought the portfolio value back up after the money was cashed out. Weinstein dismissed the accusations as “utter nonsense” as the pension fund had $500 million in the portfolio.

For this year, though, Saba Capital’s gain is at a meager 6.8% after losing 2% in August. However, its closed-end fund of $100 million was up 20% year to date. In fact, Weinstein is known to outpace his peers in the hedge fund industry even as other firms are posting losses. For instance, Bloomberg’s hedge fund index has shown that the average hedge fund rose 1.2% through July while the S&P 500 index is up 8.4% year to date.

As it turns out, his gains were mostly from profiting from beaten-down energy funds in multi-pronged trades. Saba has trades in Linn Energy and Chesapeake Energy, purchasing debt while betting against the company’s shares. The recent slide in commodity prices has been to his fund’s tremendous advantage.

In 2010, Weinstein endowed the Tali and Boaz Weinstein Foundation to work on initiatives with underprivileged children in New York City. He is an active board member at Natan Fund, which is a philanthropic network that supports startups and other entrepreneurial organizations that demonstrate an innovative approach to addressing challenges commonly faced by Jewish people.

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